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SBI aims to raise Rs 2.5k crore via general insurance arm’s listing

​SBI General has consistently expanded its business with a focus on pricing.

, ET Bureau|
Updated: Nov 21, 2017, 09.26 AM IST
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State Bank of India, the country’s largest lender, may consider listing its general insurance arm SBI General Insurance, a joint venture with Insurance Australia Group (IAG), in 18-24 months to improve its capital cushion as the government works out plans to recapitalise the banks.

State Bank of India may raise Rs 2,500 crore by divesting 20 per cent in SBI General, based on its current performance. It raised Rs 5,600 crore by selling 8 per cent in its life insurance arm, SBI Life. The company is valued at Rs 65,975 crore.

"The listing would help to meet capital requirements as we are growing at a fast pace," said Pushan Mahapatra, MD of SBI General. "It will help shareholders monetise their investment and lead to better disclosures, improvement in governance and performance."

Recently, IAG exercised an option to raise its stake to 49 per cent in the next two years. IAG paid Rs 542 crore for a 26 per cent stake in the joint venture, which started in 2010.

"If IAG goes up to 49 per cent, the stake sale through IPO will be in proportion," said Mahapatra.

Valuation of general insurance companies is based on gross written premium and profitability. In recent listings, investors have given them a multiple of 30-32 times to earnings and three times to gross written premium.

SBI General made a profit of Rs 301 crore in the first half of the financial year with a one-time gain of Rs 170 crore from an earlier reinsurance agreement. On a standalone basis, the company reported a profit of Rs 132 crore as against Rs 5.6 crore in the same period last year.

SBI General has consistently expanded its business with a focus on pricing. The company’s gross written premium grew 44.5 per cent to Rs 1,967.65 crore in the April-October period.

"There is some time before we start reporting underwriting profit though we have cut down underwriting losses from Rs 160 crore to Rs 60 crore in the first half of this year," said Mahapatra.

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